healesville & district community enterprise limited · healesville & district community...

Healesville & District Community Enterprise Limited “Our Community – Empowered and Thriving”

ABN 64 143 284 182

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Healesville & District Community Enterprise Ltd Annual Report 2011

Contents

1. Chairman’s Report 3

2. Vale 5

3. Manager’s Report 6

4. Director’s Report 7

5. Financial Statements as at 30th

June, 2011 10

Income Statement 10

Balance Sheet 11

Equity Statement 12

Cash Flow 13

6. Notes to Financial Statements 14

Financial Instrument 28

7. Directors Declaration 29

8. Independent Audit Report 30

9. Auditor’s Independence Declaration 32


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1. CHAIRMAN ’S REPORT It gives me great pleasure to present the first Chairman’s report of Healesville & District Community Enterprise Limited. The Company was registered as a public Company on 22 April 2010 with the aim of establishing a Community Bank® branch in Healesville. Our mission is: “Our Community – Empowered and Thriving”. To open a Community Bank® branch we first had to raise the required capital of $790,000. Our prospectus was launched to our community on 14 July 2010. The opportunity for a Healesville Community Bank® Branch of Bendigo Bank would afford our community the chance not only to secure great branch banking services, but to improve our long-term prospects by retaining greater control over the district’s capital resources. Our community embraced the concept with our prospectus closed with $899,026 capital raised. The Board was extremely pleased with the community response to the prospectus. This is a reflection of the hard work put in by the Directors and Steering Committee members since we began our campaign in early 2010. After building modifications and staff selection and training we launched your Community Bank® branch which opened its doors on Friday 18 February 2011. On opening we commenced “Empowering” our community with $500 grants going to Healesville SES, Toolangi Castella District Community House, Healesville & District Historical Society, Healesville Interchurch Community Care and $250 to Mt Evelyn Special Developmental School and Healesville Primary School. As we grow so will our return back to our community. Suzanne Dixon, our Branch Manager, and her team have done a great job providing outstanding customer service and growing the business since we opened the doors to your Bank. And even though our first annual report is only for a five month period (February – June), we are on track with the prospectus forecasts. Business is growing with loans and deposits of over $10 million to date. It has also been a challenging beginning to your new Community Bank® branch. I sadly have to note the passing of fellow Board member Colin Johanson. Colin, a retired banker, was able to see the branch just prior to its opening and was very proud of our achievement. He was a great contributor to our Board and will be sadly missed.

We had two staff changes in the initial months of opening. This placed enormous strain on our Branch Manager and the other staff, whilst replacements were employed. They managed the difficulties professionally and faultlessly whilst continuing to grow the business. We have a lot of work to do in the coming year but despite some of the challenges it has been a good start to the business. For that I wish to thank, on behalf of all shareholders, the Directors, advisors and Steering Committee members for their very significant workload during this establishment phase. I also thank them for their support throughout and also for their contribution to the local community. On behalf of the Board I would like to thank Mr Adam Rimington, Community Development Support Manager with Bendigo and Adelaide Bank, and Mrs Jaqui Hall, our mentor from Upper Yarra Community Enterprise Ltd. They were a constant driving force, with assistance, support and encouragement, throughout our development. All the other Community Bank® branches in the Yarra Valley were unstinting in their support of our campaign and I thank them all.


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Now the branch is open Mark Nolan, our Regional Manager, has been an invaluable support. Thank you to our shareholders, customers and local community for supporting your Community Bank® branch. We hope you will continue to be advocates for the bank, promoting the advantages of banking with a bank that supports your community. If you haven’t done so already, please consider moving all or any of your banking business over because as our business grows so will our community support.

Gary Slater

Chairman


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2. VALE

Vale

Colin Johanson

1936 - 2011

In grateful appreciation of Col’s invaluable assist ance both as an original Steering Committee member,

and as a Director.

Fondly remembered, Sadly missed


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3. MANAGER ’S REPORT Hello and welcome, my name is Suzanne Dixon your local Branch Manager and this is our very first Manager’s Report. It’s very important to us that you are greeted by friendly staff that welcome you with a smile in a face to face environment and really personalise the experience.

Our local community celebrated the opening of Healesville Community Bank® Branch on Friday 18 February 2011 which is located at 205 Maroondah Highway, Healesville. We are part of the Yarra Ranges Region and were the 13th Community Bank ® branch to open in the region.

Being a brand new Community Bank® branch has not only given the district another option for their banking needs but has also allowed us to give back to the local community in a relatively short space of time. At the branch opening we saw many community grants being presented. These funds were distributed to community groups such as Healesville SES, Toolangi/Castella Community house and Darren’s Dinner, each group received $500. The new satellite integration programme between Healesville and Mount Evelyn Special Development School also received $250.

As of 30 June 2011 our total book balance was at $11.4 million. This result is due to obtaining a solid customer base that believes in what our bank is doing for the community. Our customer numbers as at 30 June 2011 were sitting at 387 customers which is consistently growing. Our product’s per customer is currently at 1.902 this means for every customer we have, they each have around 2 products with us. Through our vast range of products and services, such as insurance, financial planning, foreign exchange and business banking, we are able to provide a full financial service for the district and look after varying banking requirements. And now let me present the staff. Our Customer Relationship Officers, Cheryl and Amanda, have been with us since we opened in February and have made a valuable contribution to the team. We also welcome Jayne who joined the team in July and has fitted in perfectly. Thank you to all of you for your great teamwork. I would like to thank all of our new customers and existing customers for all your support and welcome anyone new to come in and say hello, meet our fantastic team and consider moving your banking across to support a bank that not only gives back to your local community but takes pride in delivering exceptional customer service and building a long term relationship. Suzanne Dixon Branch Manager


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Directors

Gary James Slater Frederick Lewis WardChairman TreasurerAge: 54 Age: 80Occupation: General Manager Occupation: Retired

Neil Ferderick Skinner Robert James GannawaySecretary DirectorAge: 64 Age: 64Occupation: Retired Occupation: Graphic Designer

Kathleen Therese Gannaway Kerri Lee GodingDirector DirectorAge: 59 Age: 58Occupation: Journalist Occupation: Executive Officer

Kathleen Ann Holton Barbara Jean HonanDirector Director Age: 56 Age: 68Occupation: Manager - Age care services Occupation: Advertising Account Executive

Jeanette Lesley McRae Sandra Alma SchofferDirector Director Age: 56 Age: 58Occupation: Community Development Occupation: Retired

Andrew Ashley Vivian Ricketson Alfred Colin JohansonDirector (Resigned 4 June 2011) Director (Deceased January 2011)

Experience & Expertise: Jeanette is a Healesvilleresident of 20 years and has been the local Councillorfor the past five years. Jeanette has a diversebackground in Federal, State and Local Government,and experience in running her own home based proofr

Experience & Expertise: Currently a committee memberof the Healesville RSL, Former committee member ofthe Relay For Life – Cancer Council. AdvancedCertificate of Accounting. Employed as a payroll officerand accounts clerk

Experience & Expertise: Journalist with MountainViews Newspaper for the past 12 years. Resident ofHealesville since 1983.Active volunteer with Gatewayfest, Relay for Life, Badger Creek CFA and BadgerCreek Old School Building

Experience & Expertise: Secretary of HealesvilleFootball & Netball Club. Advanced Diploma CommunityServices Management. Extensive experience inhospitality, tourism and event management

Experience & Expertise: Chairperson of TownshipGroup – Community 3777. Certificate III in Aged Care.Diploma of Teaching and a Graduate Diploma inStudent Welfare

Experience & Expertise: President of HealesvilleChamber of Commerce & Industry, President ofHealesville Living & Learning Centre, Chairperson of theHealesville Smooth Life Program. Involved in theorganization of the Gateway Festival.

Your directors submit the financial statements of the company for the financial year ended 30 June 2011.

The names and details of the company's directors who held office during or since the end of the financial year:

No directors have material interests in contracts or proposed contracts with the company.

Experience & Expertise: Yarra Rangers economicrecovery committee, Healesville Chamber ofCommerce committee, Manager of Healesvillesanctuary, Manager of Healesville RSL, Owneroperator of own business

Experience & Expertise: Accountant for over 49 yearswith experience in cost accounting in the car and rubberindustries. He is a current member of the local ProbusClub. He has assisted as a driver for HealesvilleInterchurch Community Care Inc.

Experience & Expertise: 42 years in the mechanicalservices / air conditioning industry. Worked in Taiwanfor two years on the high speed rail project. Secretaryat the local RSL

Experience & Expertise: Past CFA volunteer firefighter,past vickick coordinator, Cert.2 in InformationTechnology (Computer Applications). 25 years in salesboth wholesale and retail

4. DIRECTOR’S REPORT


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Company Secretary

Principal Activities

Operating Results

Year ended30 June 2011

$

(152,495)

Significant Changes in the State of Affairs

Matters Subsequent to the End of the Financial Year

Likely Developments

Environmental Regulation

Directors' Benefits

There are no Executives within the company whose remuneration is required to be disclosed.

The company is not subject to any significant environmental regulation.

Neil has over 42 years in the mechanical services and air conditioning industies. He has worked in Taiwan for two years on the highspeed rail project. Neil is also currently the Secretary at the local RSL

No Director of the company receives remuneration for services as a company director or Committee member.

The principal activities of the company during the course of the financial year were in facilitating Community Bank® services undermanagement rights to operate a franchised branch of Bendigo and Adelaide Bank Limited.

No director has received or become entitled to receive, during or since the financial year, a benefit because of a contract made by thecompany, controlled entity or related body corporate with a director, a firm which a director is a member or an entity in which a directorhas a substantial financial interest except as disclosed in note 19 to the financial statements. This statement excludes a benefitincluded in the aggregate amount of emoluments received or due and receivable by directors shown in the company's accounts, or thefixed salary of a full-time employee of the company, controlled entity or related body corporate.

Operations have continued to perform in line with expectations. The loss of the company for the financial year after provision for incometax was:

The company will continue its policy of facilitating banking services to the community.

In the opinion of the directors there were no significant changes in the state of affairs of the company that occurred during the financialyear under review not otherwise disclosed in this report or the financial statements.

There are no matters or circumstances that have arisen since the end of the financial year that have significantly affected or maysignificantly affect the operations of the company, the results of those operations or the state of affairs of the company, in future years.

Remuneration Report

The company secretary is Neil Frederick Skinner. Neil was appointed to the position of secretary on 22 April 2010

During the period $889,014 of capital was raised and the branch was opened on 21 February 2011


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Indemnification and Insurance of Directors and Offi cers

Directors Meetings

The number of directors meetings attended by each of the directors of the company during the year were:

Eligible AttendedGary James Slater 35 30

Frederick Lewis Ward 35 33

Neil Ferderick Skinner 35 31

Robert James Gannaway 35 26

Kathleen Therese Gannaway 35 30

Kerri Lee Goding 35 28

Kathleen Ann Holton 35 31

Barbara Jean Honan 35 27

Jeanette Lesley McRae 35 6

Sandra Alma Schoffer 35 19

Andrew Ashley Vivian Ricketson (Resigned 4 June 2011) 34 24

Alfred Colin Johanson (Resigned 20 January 2011) 26 7

Non Audit Services

●

●

Auditors' Independence Declaration

Gary James Slater, Chairman

Signed in accordance with a resolution of the board of directors at Healesville, Victoria on 21 September 2011.

The company has indemnified all directors and the manager in respect of liabilities to other persons (other than the company or relatedbody corporate) that may arise from their position as directors or manager of the company except where the liability ar

Disclosure of the nature of the liability and the amount of the premium is prohibited by the confidentiality clause of the contract ofinsurance. The company has not provided any insurance for an auditor of the company or a related body corporate.

A copy of the auditors' independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 4.

The board of directors has considered the position, in accordance with the advice received from the audit committee and is satisfiedthat the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by theCorporations Act 2001.

The directors are satisfied that the provision of non-audit services by the auditor, as set out in the notes did not compromise the auditorindependence requirements of the Corporations Act 2001 for the following reasons:

all non-audit services have been reviewed by the audit committee to ensure they do not impact on the impartiality and objectivity ofthe auditor;

none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics forProfessional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or a decision-makingcapacity for the company, acting as advocate for the company or jointly sharing economic risk and rewards.

Board Meetings Attended

The Board has three sub-committees, Human Resources, Sponsorship & Marketing and Property which have elected Directors whomeet on a regular, or as needs basis, and present reports/recommendations to the monthly Board meetings where required.

The company may decide to employ the auditor on assignments additional to their statutory duties where the auditor's expertise andexperience with the company are important. Details of the amounts paid or payable to the auditor (Andrew Frewin & Stewart) for auditand non audit services provided during the year are set out in the notes to the accounts.


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5. FINANCIAL STATEMENTS AS AT 30TH JUNE, 2011 INCOME STATEMENT

2011 2010Notes $ $

Revenues from ordinary activities 4 38,053 -

Employee benefits expense (117,542) -

Charitable donations, sponsorship, advertising and promotion (2,295) -

Occupancy and associated costs (55,121) -

Systems costs (17,098) -

Depreciation and amortisation expense 5 (14,877) -

Finance costs 5 (60) -

General administration expenses (50,906) -

Loss before income tax credit (219,846) -

Income tax credit 6 67,351 -

Loss after income tax credit (152,495) -

Total comprehensive income for the year (152,495) -

Earnings per share (cents per share) c c

- basic for profit for the year 20 (29.87) 0.00


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BALANCE SHEET

2011 2010Notes $ $

ASSETS

Current Assets

Cash and cash equivalents 7 329,842 12 Trade and other receivables 8 16,161 -

Total Current Assets 346,003 12

Non-Current Assets

Property, plant and equipment 9 220,637 - Intangible assets 10 102,666 - Deferred tax assets 11 67,351 -

Total Non-Current Assets 390,654 -

Total Assets 736,657 12

LIABILITIES

Trade and other payables 12 12,226 - Provisions 13 4,846 -

Total Liabilities 17,072 -

Net Assets 719,585 12

Equity

Issued capital 14 872,080 12 Accumulated losses 15 (152,495) -

Total Equity 719,585 12


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EQUITY STATEMENT

Issued Accumulated TotalCapital Losses Equity

$ $ $

Balance at 1 July 2009 - - -

Total comprehensive income for the year - - -

Transactions with owners in their capacity as owner s:

Shares issued during period 12 - 12

Costs of issuing shares - - -

Dividends provided for or paid - - -

Balance at 30 June 2010 12 - 12

Balance at 1 July 2010 12 - 12

Total comprehensive income for the year - (152,495) (152,495)

Transactions with owners in their capacity as owner s:

Shares issued during period 899,014 - 899,014

Costs of issuing shares (26,946) - (26,946)

Dividends provided for or paid - - -

Balance at 30 June 2011 872,080 (152,495) 719,585


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2011 2010Notes $ $

Cash Flows From Operating Activities

Receipts from customers 46,674 - Payments to suppliers and employees (251,291) - Interest received 619 - Interest paid (60) -

Net cash used in operating activities 16 (204,058) -

Cash Flows From Investing Activities

Payments for property, plant and equipment (228,180) - Payments for intangible assets (110,000) -

Net cash used in investing activities (338,180) -

Cash Flows From Financing Activities

Proceeds from issues of shares 899,014 12 Payment for share issue costs (26,946) -

Net cash provided by financing activities 872,068 12

Net increase in cash held 329,830 12

Cash and cash equivalents at the beginning of the financial year 12 -

Cash and cash equivalents at the end of the financi al year 7(a) 329,842 12

CASH FLOW


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Note 1.

AASB 101 Presentation of Financial Statements

Summary of Significant Accounting Policies

a) Basis of Preparation

These financial statements and notes comply with IFRS International Financial Reporting Standards (IFRS) as issued by theInternational Accounting Standards Board.

The financial statements have been prepared under the historical cost convention on an accruals basis as modified by therevaluation of financial assets and liabilities at fair value through profit or loss and where stated, current valuations of non-current assets. Cost is based on the fair values of the consideration given in exchange for assets.

These general purpose financial statements have been prepared in accordance with Australian Accounting Standards, otherauthoritative pronouncements of the Australian Accounting Standard Boards and the Corporations Act 2001.

Compliance with IFRS

Historical cost convention

Critical accounting estimates

The preparation of the financial statements requires the use of certain critical accounting estimates. It also requiresmanagement to exercise its judgement in the process of applying the company's accounting policies. These areas involvinga higher degree of judgement or complexities, or areas where assumptions and estimates are significant to the financialstatements are disclosed in note 3.

Financial statement presentation

The company has applied revised AASB 101 Presentation of Financial Statements which became effective on 1 January2009. The company has elected to present all items of income and expense recognised in the period in a single statement ofcomprehensive income.

Where required by Australian Accounting Standards comparative figures have been adjusted to conform with changes inpresentation for the current financial year.

Adoption of new and revised Accounting Standards

Disclosure impact

During the current year the entity has adopted all of the new and revised Australian Accounting Standards and Interpretationsapplicable to its operations which became mandatory.

Comparative figures

The adoption of these standards has impacted the recognition, measurement and disclosure of certain transactions. Thefollowing is an explanation of the impact the adoption of these standards and interpretations has had on the financialstatements of the company.

In September 2007 the Australian Accounting Standards Board revised AASB 101, and as a result there have been changesto the presentation and disclosure of certain information within the financial statements. Below is an overview of the keychanges and the impact on the company’s financial statements.

Terminology changes – The revised version of AASB 101 contains a number of terminology changes, including theamendment of the names of the primary financial statements.

Reporting changes in equity – The revised AASB 101 requires all changes in equity arising from transactions with owners intheir capacity as owners to be presented separately from non-owner changes in equity. Owner changes in equity are to bepresented in the statement of changes in equity, with non-owner changes in equity presented in the statement ofcomprehensive income. The previous version of AASB 101 required that owner changes in equity and other comprehensiveincome be presented in the statement of changes in equity.

Statement of comprehensive income – The revised AASB 101 requires all income and expenses to be presented in eitherone statement, the statement of comprehensive income, or two statements, a separate income statement and a statement ofcomprehensive income. The previous version of AASB 101 required only the presentation of a single income statement.

6. NOTES TO FINANCIAL STATEMENTS


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Note 1.

• advice and assistance in relation to the design, layout and fit out of the Community Bank® branch;

The branch operates as a franchise of Bendigo and Adelaide Bank Limited, using the name “Bendigo Bank” and the logo and system of operations of Bendigo and Adelaide Bank Limited. The company manages the Community Bank® branch onbehalf of Bendigo and Adelaide Bank Limited, however all transactions with customers conducted through the Community Bank® branches are effectively conducted between the customers and Bendigo and Adelaide Bank Limited.

All deposits are made with Bendigo and Adelaide Bank Limited, and all personal and investment products are products ofBendigo and Adelaide Bank Limited, with the company facilitating the provision of those products. All loans, leases or hirepurchase transactions, issues of new credit or debit cards, temporary or bridging finance and any other transaction thatinvolves creating a new debt, or increasing or changing the terms of an existing debt owed to Bendigo and Adelaide BankLimited, must be approved by Bendigo and Adelaide Bank Limited. All credit transactions are made with Bendigo andAdelaide Bank Limited, and all credit products are products of Bendigo and Adelaide Bank Limited.

The AASB has issued new and amended accounting standards and interpretations that have mandatory application dates forfuture reporting periods, as follows:

● AASB 9: Financial Instruments and AASB 2009-11: Amendments to Australian Accounting Standards arising from AASB 9[AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 121, 127, 128, 131, 132, 136, 139, 1023 & 1038 and Interpretations 10 & 12](applicable for annual reporting periods commencing on or after 1 January 2013)

● AASB 2009-12: Amendments to Australian Accounting Standards [AASBs 5, 8, 108, 110, 112, 119, 133, 137, 139, 1023 &1031 and Interpretations 2, 4, 16, 1039 & 1052] (applicable for annual reporting periods commencing on or after 1 January2011)

These standards are applicable retrospectively and amend the classification and measurement of financial assets. Thecompany has determined these amendments will have no impact on the preparation of the financial statements andtherefore they have not been applied.

Economic dependency - Bendigo and Adelaide Bank Limited

Bendigo and Adelaide Bank Limited provides significant assistance in establishing and maintaining the Community Bank®branch franchise operations. It also continues to provide ongoing management and operational support, and otherassistance and guidance in relation to all aspects of the franchise operation, including advice in relation to:

Other comprehensive income – The revised version of AASB 101 introduces the concept of “other comprehensive income”which comprises of income and expense that are not recognised in profit or loss as required by other Australian AccountingStandards. Items of other comprehensive income are to be disclosed in the statement of comprehensive income. Entities arerequired to disclose the income tax relating to each component of other comprehensive income. The previous version ofAASB 101 did not contain an equivalent concept.

The company’s financial statements contain a single statement of comprehensive income.

New Accounting Standards for application in future periods

Summary of Significant Accounting Policies (continued)

a) Basis of Preparation (continued)

The company has entered into a franchise agreement with Bendigo and Adelaide Bank Limited that governs themanagement of the Community Bank® branch at Healesville, Victoria.

• training for the branch manager and other employees in banking, management systems and interface protocol;

• methods and procedures for the sale of products and provision of services;

• security and cash logistic controls;

• calculation of company revenue and payment of many operating and administrative expenses

• the formulation and implementation of advertising and promotional programs; and

• sales techniques and proper customer relations.


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Note 1. Summary of Significant Accounting Policies (continued)

b) Revenue

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit orloss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reportingdate. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (orrefundable).

The franchise agreement with Bendigo and Adelaide Bank Limited provides for three types of revenue earned by thecompany. First, the company is entitled to 50% of the monthly gross margin earned by Bendigo and Adelaide Bank Limitedon products and services provided through the company that are regarded as “day to day” banking business (ie ‘marginbusiness’). This arrangement also means that if the gross margin reflects a loss (that is, the gross margin is a negativeamount), the company effectively incurs, and must bear, 50% of that loss.

c) Income Tax

Current tax

Deferred tax

Deferred tax is accounted for using the balance sheet liability method on temporary differences arising from differencesbetween the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of thoseitems.

Revenue is recognised when the amount of revenue can be reliably measured, it is probable that future economic benefit willflow to the company and any specific criteria have been met. Interest and fee revenue is recognised when earned. The gainor loss on disposal of property, plant and equipment is recognised on a net basis and is classified as income rather thanrevenue. All revenue is stated net of the amount of Goods and Services Tax (GST).

In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised tothe extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differencesor unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if thetemporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of abusiness combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is notrecognised in relation to taxable temporary differences arising from goodwill.

Revenue calculation

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the assetand liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted orsubstantively enacted by reporting date. The measurement of deferred tax liabilities reflects the tax consequences that wouldfollow from the manner in which the consolidated entity expects, at the reporting date, to recover or settle the carryingamount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax and when thebalances relate to taxes levied by the same taxation authority and the company entity intends to settle its tax assets andliabilities on a net basis.

The second source of revenue is commission paid by Bendigo and Adelaide Bank Limited on the other products andservices provided through the company (ie ‘commission business’). The commission is currently payable on various specified products and services, including insurance, financial planning, common fund, Sandhurst Select, superannuation, commercialloan referrals, products referred by Rural Bank, leasing referrals, fixed loans and certain term deposits (>90 days). Theamount of commission payable can be varied in accordance with the Franchise Agreement (which, in some cases, permitscommissions to be varied at the discretion of Bendigo and Adelaide Bank Limited). This discretion has be exercised onseveral occasions previously. For example in February 2011 Bendigo and Adelaide Bank Limited reduced commissions ontwo core banking products to ensure a more even distribution of income between Bendigo and Adelaide Bank Limited and itsCommunity Bank® partners. The revenue share model is subject to regular review to ensure that the interests of Bendigoand Adelaide Bank Limited and Community Bank® companies remain balanced.

The third source of revenue is a proportion of the fees and charges (ie, what are commonly referred to as ‘bank fees andcharges’) charged to customers. This proportion, determined by Bendigo and Adelaide Bank Limited, may vary betweenproducts and services and may be amended by Bendigo and Adelaide Bank Limited from time to time.

The following is a summary of the material accounting policies adopted by the company in the preparation of the financialstatements. The accounting policies have been consistently applied, unless otherwise stated.


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Note 1.

40 years2.5 - 40 years

4 - 40 years

The following estimated useful lives are used in the calculation of depreciation:

- leasehold improvements - plant and equipment - furniture and fittings

The franchise fee paid to Bendigo and Adelaide Bank Limited has been recorded at cost and is amortised on a straight linebasis over the life of the franchise agreement.

The establishment processing fee paid to Bendigo and Adelaide Bank Limited when renewing the franchise agreement hasalso been recorded at cost and is amortised on a straight line basis over the life of the franchise agreement.


c) Income Tax (continued)

Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land. Depreciation iscalculated on a straight line basis so as to write off the net cost of each asset over its expected useful life to its estimatedresidual value. Leasehold improvements are depreciated at the rate equivalent to the available building allowance using thestraight line method. The estimated useful lives, residual values and depreciation method is reviewed at the end of eachannual reporting period.

f) Trade Receivables and Payables

Plant and equipment, leasehold improvements and equipment under finance lease are stated at cost less accumulateddepreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the eventthat settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amountspayable in the future to their present value as at the date of acquisition.

g) Property, Plant and Equipment

Current and deferred tax is recognised as an expense or income in the statement of comprehensive income, except when itrelates to items credited or debited to equity, in which case the deferred tax is also recognised directly in equity, or where itarises from initial accounting for a business combination, in which case it is taken into account in the determination ofgoodwill or excess.

d) Employee Entitlements

Current and deferred tax for the period

h) Intangibles

Receivables are carried at their amounts due. The collectability of debts is assessed at balance date and specific provision ismade for any doubtful accounts. Liabilities for trade creditors and other amounts are carried at cost that is the fair value ofthe consideration to be paid in the future for goods and services received, whether or not billed to the company.

For the purposes of the statement of cash flows, cash includes cash on hand and in banks and investments in money marketinstruments, net of outstanding bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on thebalance sheet.

Provision is made for the company's liability for employee benefits arising from services rendered by employees to balancedate. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to bepaid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measuredat the present value of the estimated future cash outflows to be made for those benefits.

The company contributes to a defined contribution plan. Contributions to employee superannuation funds are chargedagainst income as incurred.

e) Cash and Cash Equivalents


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Note 1.

(i)

(ii)

(iii)


All loans are initially measured at the principal amount. Interest is recognised as an expense as it accrues.

i) Payment Terms

Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a partyto the contractual provisions of the instrument.

Recognition and initial measurement

Receivables and payables are non interest bearing and generally have payment terms of between 30 and 90 days.

At each reporting date, the entity assesses whether there is objective evidence that a financial instrument has been impaired.Impairment losses are recognised in the statement of comprehensive income.

Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed ordeterminable payments, and it is the entity’s intention to hold these investments to maturity. They aresubsequently measured at amortised cost using the effective interest rate method.

Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term.Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged asexpenses in the periods in which they are incurred. Lease incentives under operating leases are recognised as a liability andamortised on a straight-line basis over the life of the lease term.

A provision for dividends is not recognised as a liability unless the dividends are declared, determined or publiclyrecommended on or before the reporting date.

Financial liabilities

k) Financial Instruments

Financial instruments are initially measured at fair value plus transaction costs. Financial instruments are classified andmeasured as set out below.

Derecognition

Classification and subsequent measurement

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quotedin an active market and are subsequently measured at amortised cost using the effective interest rate method.

Held-to-maturity investments

Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred toanother party whereby the entity no longer has any significant continuing involvement in the risks and benefits associatedwith the asset.

j) Borrowings

Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legalownership are transferred to the company are classified as finance leases. Finance leases are capitalised by recording anasset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of theminimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction ofthe lease liability and the lease interest expense for the period.

Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised costusing the effective interest rate method.

Impairment

Loans and receivables

l) Leases

m) Provisions

Provisions are recognised when the economic entity has a legal, equitable or constructive obligation to make a futuresacrifice of economic benefits to other entities as a result of past transactions of other past events, it is probable that a futuresacrifice of economic benefits will be required and a reliable estimate can be made of the amount of the obligation.


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Note 1.

Note 2.

Interest-bearing assets are held with Bendigo and Adelaide Bank Limited and subject to movements in market interest.Interest-rate risk could also arise from long-term borrowings. Borrowings issued at variable rates expose the company tocash flow interest-rate risk. The company believes that its sound relationship with Bendigo and Adelaide Bank Limitedmitigates this risk significantly.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payableto, the taxation authority is included as part of receivables or payables in the balance sheet. Cash flows are included in thestatement of cash flows on a gross basis.

n) Contributed Equity

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company, excluding any costsof servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during thefinancial year, adjusted for bonus elements in ordinary shares issued during the year.


Ordinary shares are recognised at the fair value of the consideration received by the company. Any transaction costs arisingon the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

Financial Risk Management

Revenues, expenses and assets are recognised net of the amount of Goods and Services Tax (GST), except where theamount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised aspart of the cost of acquisition of the asset or as part of the expense.

o) Earnings Per Share

(iv) Liquidity risk

Prudent liquidity management implies maintaining sufficient cash and marketable securities and the availability of fundingfrom credit facilities. The company believes that its sound relationship with Bendigo and Adelaide Bank Limited mitigates thisrisk significantly.

The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to,the taxation authority are classified as operating cash flows.

(v) Cash flow and fair value interest rate risk

The company has no significant concentrations of credit risk. It has policies in place to ensure that customers have anappropriate credit history. The company's franchise agreement limits the company's credit exposure to one financialinstitution, being Bendigo and Adelaide Bank Limited.

The company is not exposed to equity securities price risk as it does not hold investments for sale or at fair value. Thecompany is not exposed to commodity price risk.

(iii) Credit risk

(i) Market risk

The company has no exposure to any transactions denominated in a currency other than Australian dollars.

(ii) Price risk

The company's activities expose it to a limited variety of financial risks: market risk (including currency risk, fair value interestrisk and price risk), credit risk, liquidity risk and cash flow interest rate risk. The company's overall risk management programfocuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financialperformance of the entity. The entity does not use derivative instruments.

Risk management is carried out directly by the board of directors.

p) Goods and Services Tax


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Note 2.

(vi) Capital management

(i) (a)

(b)

(ii)

There were no changes in the company's approach to capital management during the year.

Note 3.

The company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,seldom equal the related actual results.

These judgements and assumptions are subject to risk and uncertainty, hence there is a possibility that changes incircumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilitiesrecognised on the balance sheet and the amount of other tax losses and temporary differences not yet recognised. In suchcircumstances, some or all of the carrying amount of recognised deferred tax assets and liabilities may require adjustment,resulting in corresponding credit or charge to the statement of comprehensive income.

Estimation of useful lives of assets

The estimation of the useful lives of assets has been based on historical experience and the condition of the asset isassessed at least once per year and considered against the remaining useful life. Adjustments to useful lives are made whenconsidered necessary.

The calculations require the use of assumptions.

Taxation

Judgement is required in assessing whether deferred tax assets and certain tax liabilities are recognised on the balancesheet. Deferred tax assets, including those arising from un-recouped tax losses, capital losses and temporary differences,are recognised only where it is considered more likely than not that they will be recovered, which is dependent on thegeneration of sufficient future taxable profits.

the distribution limit is the greater of:

Financial Risk Management (continued)

Critical Accounting Estimates and Judgements

The board's policy is to maintain a strong capital base so as to sustain future development of the company. The board ofdirectors monitor the return on capital and the level of dividends to shareholders. Capital is represented by total equity asrecorded in the balance sheet.

In accordance with the franchise agreement, in any 12 month period, the funds distributed to shareholders shall not exceedthe distribution limit.

Assumptions about the generation of future taxable profits depend on management's estimates of future cash flows. Thesedepend on estimates of future sales volumes, operating costs, capital expenditure, dividends and other capital managementtransactions. Judgements are also required about the application of income tax legislation.

Further details of the nature of these assumptions and conditions may be found in the relevant notes to the financialstatements.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, includingexpectations of future events that may have a financial impact on the entity and that are believed to be reasonable under thecircumstances.

Management has identified the following critical accounting policies for which significant judgements, estimates andassumptions are made. Actual results may differ from these estimates under different assumptions and conditions and maymaterially affect financial results or the financial position reported in future periods.

20% of the profit or funds of the franchisee otherwise available for distribution to shareholders in that 12 monthperiod; andsubject to the availability of distributable profits, the relevant rate of return multiplied by the average level of sharecapital of the franchisee over that 12 month period; andthe relevant rate of return is equal to the weighted average interest rate on 90 day bank bills over that 12 monthperiod plus 5%.

The board is managing the growth of the business in line with this requirement. There are no other externally imposed capitalrequirements, although the nature of the company is such that amounts will be paid in the form of charitable donations andsponsorship. Charitable donations and sponsorship paid for the year ended 30 June 2011 can be seen in the statement ofcomprehensive income.


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Note 3.

2011 2010Note 4. $ $

Operating activities: - services commissions 32,455 - - other revenue 2,845 -

Total revenue from operating activities 35,300 -

Non-operating activities:- interest received 2,753

Total revenue from non-operating activities 2,753 -

Total revenues from ordinary activities 38,053 -

Note 5.

Depreciation of non-current assets: - plant and equipment 4,204 - - leasehold improvements 3,340 -

Amortisation of non-current assets: - franchise agreement 667 - - franchise establishment fee 6,666 -

14,877 -

Finance costs: - interest paid 60 -

Bad debts - -

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimatedfuture cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessmentsof the time value of money and the risks specific to the asset for which the estimates of future cash flows have not beenadjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carryingamount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit orloss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as arevaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to therevised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed thecarrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generatingunit) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately, unless the relevant asset iscarried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase.

Critical Accounting Estimates and Judgements (continued)

Revenue from Ordinary Activities

Expenses

Impairment of assets

At each reporting date, the company reviews the carrying amounts of its tangible and intangible assets that have an indefiniteuseful life to determine whether there is any indication that those assets have suffered an impairment loss. If any suchindication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (ifany). Where the asset does not generate cash flows that are independent from other assets, the consolidated entityestimates the recoverable amount of the cash-generating unit to which the asset belongs.


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2011 2010Note 6. $ $

The components of tax credit comprise:- Future income tax benefit attributed to losses (68,889) - - Movement in deferred tax 1,538 -

(67,351) -

Operating loss (219,846) -

Prima facie tax on loss from ordinary activities at 30% (65,954) -

Add tax effect of:- non-deductible expenses 220 - - timing difference expenses (1,538) - - other deductible expenses (1,617) -

(68,889) -

Movement in deferred tax 11 1,538 -

(67,351) -

Note 7.

Cash at bank and on hand 329,842 12

Note 7.(a) Reconciliation of cash

Cash at bank and on hand 329,842 12

Note 8.

Trade receivables 2,430 - Other receivables and accruals 5,893 - Prepayments 7,838 -

16,161 -

Note 9.

Plant and equipmentAt cost 34,318 - Less accumulated depreciation (4,204) -

30,114 -

Leasehold improvementsAt cost 193,863 - Less accumulated depreciation (3,340) -

190,523 -

Total written down amount 220,637 -

Property, Plant and Equipment

The prima facie tax on loss from ordinary activities before income taxis reconciled to the income tax expense as follows:

Income Tax Credit

The above figure is reconciled to cash at the end of the financial yearas shown in the statement of cashflows as follows:

Cash and Cash Equivalents

Trade and Other Receivables


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2011 2010Note 9. $ $

Movements in carrying amounts:

Plant and equipmentCarrying amount at beginning - - Additions 34,318 - Disposals - - Less: depreciation expense (4,204) -

Carrying amount at end 30,114 -

Leasehold improvementsCarrying amount at beginning - - Additions 193,863 - Disposals - - Less: depreciation expense (3,340)

Carrying amount at end 190,523 -


Note 10.

Franchise feeAt cost 10,000 - Less: accumulated amortisation (667) -

9,333 -

Establishment/Renewal processing feeAt cost 100,000 - Less: accumulated amortisation (6,667) -

93,333 -


Note 11.

Deferred tax assets- accruals - - - employee provisions 1,454 - - tax losses carried forward 68,888 -

70,342 -

Deferred tax liability- accruals (640) - - deductible prepayments (2,351) -

(2,991) -

Net deferred tax asset (67,351) -

Movement in deferred tax charged to statement of comprehensive income 1,538 -

Note 12.

Trade creditors 3,588 - Other creditors and accruals 8,638 -

12,226 -

Property, Plant and Equipment (continued)

Intangible Assets

Tax

Trade and Other Payables


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2011 2010Note 13. $ $

Provision for annual leave 4,846 -

Note 14.

899,026 Ordinary shares fully paid (2010: 12) 899,026 12 Less: equity raising expenses (26,946) -

872,080 12

(a) Voting rights

(b)

(c) Transfer

●

●

●

In the opinion of the board they do not have a close connection to the community or communities in which thecompany predominantly carries on business (the "close connection test").Where the person is a shareholder, after the transfer of shares in the company to that person the number ofshareholders in the company is (or would be) lower than the base number (the "base number test"). The basenumber is 259. As at the date of this report, the company had 288 shareholders.

Subject to the foregoing, shareholders may transfer shares by a proper transfer effected in accordance with thecompany’s constitution and the Corporations Act.

A person must not have a prohibited shareholding interest in the company.

Prohibited shareholding interest

In summary, a person has a prohibited shareholding interest if any of the following applies:

They control or own 10% or more of the shares in the company (the "10% limit").

Rights attached to shares

Subject to some limited exceptions, each member has the right to vote at a general meeting.

On a show of hands or a poll, each member attending the meeting (whether they are attending the meeting inperson or by attorney, corporate representative or proxy) has one vote, regardless of the number of shares held.However, where a person attends a meeting in person and is entitled to vote in more than one capacity (forexample, the person is a member and has also been appointed as proxy for another member) that person mayonly exercise one vote on a show of hands. On a poll, that person may exercise one vote as a member and onevote for each other member that person represents as duly appointed attorney, corporate representative or proxy.

The purpose of giving each member only one vote, regardless of the number of shares held, is to reflect thenature of the company as a community based company, by providing that all members of the community whohave contributed to the establishment and ongoing operation of the Community Bank® have the same ability toinfluence the operation of the company.

Provisions

Contributed Equity

Generally, dividends are payable to members in proportion to the amount of the share capital paid up on theshares held by them, subject to any special rights and restrictions for the time being attaching to shares. Thefranchise agreement with Bendigo and Adelaide Bank Limited contains a limit on the level of profits or funds thatmay be distributed to shareholders. There is also a restriction on the payment of dividends to certain shareholdersif they have a prohibited shareholding interest (see below).

Generally, ordinary shares are freely transferable. However, the directors have a discretion to refuse to register atransfer of shares.

Dividends

Current:


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Note 14.

2011 2010Note 15. $ $

Balance at the beginning of the financial year - - Net loss from ordinary activities after income tax (152,495) -

Balance at the end of the financial year (152,495) -

Note 16.

Loss from ordinary activities after income tax (152,495) -

Non cash items:

- depreciation 7,544 - - amortisation 7,333 -

Changes in assets and liabilities:

- increase in receivables (16,161) - increase in other assets (67,351) - increase in payables 12,226 - increase in provisions 4,846

Net cashflows provided by/(used in) operating activities (204,058) -

Note 17.

Operating lease commitmentsNon-cancellable operating leases contracted for but not capitalised in the financial statementsPayable - minimum lease payments- not later than 12 months 41,000 - - between 12 months and 5 years 133,250 - - greater than 5 years - -

174,250 -

In the constitution, members acknowledge and recognise that the exercise of the powers given to the board may causeconsiderable disadvantage to individual members, but that such a result may be necessary to enforce the prohibition.

Reconciliation of loss from ordinary activities after tax to net cash used in operating activities

Contributed Equity (continued)

Prohibited shareholding interest (continued)

Accumulated Losses

Statement of Cashflows

Leases

The business lease is a non-cancellable lease with a five-year term, with rent payable monthly in advance. The current lease expires on 1 October 2015 with the option of another 5 year term

Where a person has a prohibited shareholding interest, the voting and dividend rights attaching to the shares in which theperson (and his or her associates) have a prohibited shareholding interest, are suspended.

As with voting rights, the purpose of this prohibited shareholding provision is to reflect the community-based nature of thecompany.

The board has the power to request information from a person who has (or is suspected by the board of having) a legal orbeneficial interest in any shares in the company or any voting power in the company, for the purpose of determining whethera person has a prohibited shareholding interest. If the board becomes aware that a member has a prohibited shareholdinginterest, it must serve a notice requiring the member (or the member's associate) to dispose of the number of shares theboard considers necessary to remedy the breach. If a person fails to comply with such a notice within a specified period (thatmust be between three and six months), the board is authorised to sell the specified shares on behalf of that person. Theholder will be entitled to the consideration from the sale of the shares, less any expenses incurred by the board in selling orotherwise dealing with those shares.


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2011 2010Note 18. $ $

Amounts received or due and receivable by theauditor of the company for:

- audit and review services 3,400 -

Note 19.

The names of directors who have held office during the financial year are:

Gary James Slater

Frederick Lewis Ward

Neil Ferderick Skinner

Robert James Gannaway

Kathleen Therese Gannaway

Kerri Lee Goding

Kathleen Ann Holton

Barbara Jean Honan

Jeanette Lesley McRae

Sandra Alma Schoffer

Andrew Ashley Vivian Ricketson (Resigned 4 June 2011)

Alfred Colin Johanson (Deceased 20 January 2011)

Directors Shareholdings 2011 2010

The names of directors who have held office during the financial year are:

Gary James Slater 11,501 1

Frederick Lewis Ward 1,001 1

Neil Ferderick Skinner 1,001 1

Robert James Gannaway 1,001 1

Kathleen Therese Gannaway 1,001 1

Kerri Lee Goding 2,001 1

Kathleen Ann Holton 6,101 1

Barbara Jean Honan 1,001 1

Jeanette Lesley McRae 3,001 1

Sandra Alma Schoffer 50,001 1

Andrew Ashley Vivian Ricketson (Resigned 4 June 2011) 5,501 1

Alfred Colin Johanson (Deceased 20 January 2011) 1,001 1

Auditors' Remuneration

Director and Related Party Disclosures

No other director or related entity has entered into a material contract with the company. No director's fees have been paidas the positions are held on a voluntary basis.

Gary James Slater provided a rental property for use untill the bank location was finalised. The total paid to Gary for the yearwas $10,500


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2011 2010Note 20. $ $

(a) (152,495) -

Number Number(b)

510,490 -

Note 21.

Note 22.

Note 23.

Note 24.

Registered Office Principal Place of Business

205 Maroondah Highway 205 Maroondah Highway HEALESVILLE VIC 3777 HEALESVILLE VIC 3777

The entity is a company limited by shares, incorporated and domiciled in Australia. The registered office and principal placeof business is:

Loss attributable to the ordinary equity holders of the company used in calculating earnings per share

Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share

Registered Office/Principal Place of Business

Earnings Per Share

Events Occurring After the Balance Sheet Date

Segment Reporting

There were no contingent liabilities at the date of this report to affect the financial statements.

The economic entity operates in the service sector where it facilitates Community Bank® services in Healesville, Victoriapursuant to a franchise agreement with Bendigo and Adelaide Bank Limited.

There have been no events after the end of the financial year that would materially affect the financial statements.

Contingent Liabilities


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FINANCIAL INSTRUMENT

Interest Rate Risk

Financial instrument

2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010$ $ $ $ $ $ $ $ $ $ % %

Financial AssetsCash and cash equivalents - - - - - - - - - - 0.00 0.00

Receivables - - - - - - - - - - N/A N/A

Financial LiabilitiesInterest bearing liabilities - - - - - - - - - - 0.00 0.00

Payables - - - - - - - - - - N/A N/A

Over 1 to 5 years Non interest bearing

The maximum exposure to credit risk at balance date to recognised financial assets is the carrying amount of those assets as disclosed in the balance sheet and notes to thefinancial statements.

There are no material credit risk exposures to any single debtor or group of debtors under financial instruments entered into by the economic entity.

Floating interest Weighted averageeffective interest rate

Fixed interest rate maturing inOver 5 years

rate1 year or less


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7. DIRECTORS DECLARATION

(a)

(i)

(ii)

(b)

(c)

Gary James Slater, Chairman

Signed on the 21st of September 2011.

In the opinion of the directors:

In accordance with a resolution of the directors of Healesville & District Community Enterprises Limited, we statethat:

there are reasonable grounds to believe that the company will be able to pay its debts as and when theybecome due and payable.

the audited remuneration disclosures set out in the remuneration report section of the directors' reportcomply with Accounting Standard AASB124 Related Party Disclosures and the Corporations Regulations2001.

This declaration is made in accordance with a resolution of the board of directors.

the financial statements and notes of the company are in accordance with the Corporations Act 2001,including:

giving a true and fair view of the company's financial position as at 30 June 2011 and of itsperformance for the financial year ended on that date; and

complying with Accounting Standards, the Corporations Regulations 2001 and other mandatoryprofessional reporting requirements; and


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8. INDEPENDENT AUDIT REPORT


ABN 64 143 284 182

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ABN 64 143 284 182

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9. AUDITOR’S INDEPENDENCE DECLARATION

healesville & district community enterprise limited · healesville & district community...

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